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Fed now requires security breaches to be referred to watchdog

Federal Reserve officials in January updated their guidelines for handling sensitive policy information in the wake of investigations into a 2012 leak.

PHOTO: REUTERS

[WASHINGTON] Federal Reserve officials in January updated their guidelines for handling sensitive policy information in the wake of investigations into a 2012 leak.

One of the most significant changes was an amendment that now requires a breach of confidentiality to be "promptly" referred to the central bank's inspector general with "appropriate consultation" with the chairman.

The change was unanimously adopted at a meeting of the policy-setting Federal Open Market Committee (FOMC) on Jan 26-27, according to minutes of the gathering released Wednesday in Washington.

Previously, the program stated that the FOMC's secretary and general counsel would conduct an internal review and refer the matter to the chairman. Involvement of the internal watchdog was optional.

The Fed has been criticized for its handling of a leak of confidential monetary policy information to Medley Global Advisors in 2012. An internal review was conducted by the Fed without involvement of the inspector general, who launched a separate investigation without being requested to do so by the board. The IG has restarted the investigation in the wake of congressional scrutiny. The House Financial Services Committee is also investigating the leak.

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The changes give the power of IG referral to either the general counsel or the FOMC secretary and thus aim to reduce "the possibility of any apparent conflict of interest in making a referral determination," the minutes said.

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